Congress Urges Ouster of 2 Regulators

Published: November 23, 2004

Congress urged the Bush administration yesterday to replace the director and deputy director of the agency that regulates Fannie Mae and Freddie Mac, the largest sources of money for home mortgages.

On Saturday, as part of a $388 billion spending bill, the Senate and House called for the ouster of Armando Falcon Jr. and Stephen Blumenthal from the regulator, the Office of Federal Housing Enterprise Oversight, said David Helfert, spokesman for Representative David Obey of Wisconsin, the senior Democrat on the House Appropriations Committee.

Mr. Falcon is director and Mr. Blumenthal is the deputy director of Ofheo, as the agency is known. Stefanie Mullin, an Ofheo spokeswoman, declined to comment about the requested changes, as did White House spokeswoman Erin Healy.

Fannie Mae and Freddie Mac are mortgage finance companies chartered by the government to promote homeownership.

The request came a day after the release of a report by the Department of Housing and Urban Development's inspector general on whether Ofheo's dealings with Fannie Mae were politically motivated. Ofheo is a division of HUD.

HUD's report said Ofheo was a divided agency that, while pressuring Fannie Mae into making accounting changes, used leaks to the media to revive its reputation after its failure to uncover bookkeeping mistakes at Freddie Mac.

Democratic lawmakers will tell their Republican counterparts that the continued tenure of Mr. Falcon and Mr. Blumenthal would complicate efforts by the Treasury to create a stronger regulator, said Representative Barney Frank of Massachusetts, the senior Democrat on the House Financial Services Committee that oversees the Fannie Mae and Freddie Mac.

Senator Kit Bond, a Missouri Republican who requested the HUD investigation, inserted the request for the removal of Ofheo's leadership in the bill, said Howard Glaser, chief legal adviser to the former HUD secretary, Andrew M. Cuomo.